Recently Valve Software co-founder Gabe Newell sat down with Chris Hardwick of The Nerdist Podcast to talk about the company's plans to take over the living room entertainment space with Steam's Big Picture Mode and with hardware like Steam Box. Some of that conversation was transcribed by Games Industry International.

Newell says that the decision to enter the living room entertainment space was not much of a leap for his company:

"We thought the distinction between living rooms and PCs was artificial," said Newell. "That's why we did 10-foot [Big Picture Mode], and why we're putting 10-foot into our games onto Linux. We don't think there's any reasons why these are islands. We don't think you have a different set of friends when you go into your living room... We think you can extend the PC totally to be in the living room."

He goes on to ponder why gaming experiences seems to be walled gardens, separated across devices:

"Why doesn't my game experience continue whether I'm on mobile, in the living room, at work or on an airplane?" asked Newell. "It's not because it isn't technically feasible, and it's not because it isn't the right thing to do. It's because the people who control mobile right now, Apple, have zero interest in interoperating well with the people who currently are controlling the living room, and they're completely interested in creating this silo separate from what you're doing on your laptop or your desktop."

While Newell's comments towards Apple seem harsh, he goes on to say that innovations like the iPad have changed the user experience for the better:

Newell goes on to say that Valve's hardware plans call for input devices that offer, "the control and preciseness that you're used to with a mouse and a keyboard, except in a mobile-friendly, living room friendly way." He also thinks that the company's success gives it the unique ability to try to be "interestingly innovative."

Valve's war chest from Steam and games like Portal, Counter-Strike, Half-Life, Team Fortress, and Left 4 Dead gives the company a safety net to take some risks on hardware. He notes that hardware has become "notoriously unprofitable."

"At this point, we think that all of the margin, all of the profitability has been stolen out of [hardware]," said Newell. "Dell has terrible margins, Razer has terrible margins, and we're super profitable, so we need to start taking some of that and feeding it back into more speculative investments, like [the wearable computing] project or the controllers. So that's the big picture version of it."

Comments

That's the point Phil Harrison seemed to be missing/ignoring. All the talk about needing "deep pockets" and "getting to scale" assumes a situation where you need a certain number of the hardware out there to be able to sell enough of the software to be profitable. Valve is in a position of already making money hand over fist on software. Worst case for Valve, the hardware flubs and they continue making money selling software to people with regular PCs. Best case, the hardware takes off, and they get to make even more money selling software to an expanded number of PCs.